New Jersey lawmakers Monday evening announced a bipartisan fiscal 2011 budget deal similar to the spending plan that Gov. Chris Christie filed in March.

The Democratic-controlled Legislature and the Republican governor agreed to find $74 million of budget savings to restore certain programs that involve senior citizens, people with disabilities, cultural institutions, students, and a psychiatric hospital.

The budget plan is $29.38 billion, the same size as Christie’s March proposal, and closes a nearly $11 billion deficit. The budget includes a year-end surplus of $300 million.

Earlier cuts — such as skipping a $3 billion contribution towards future retirement costs, reducing aid to schools and municipalities by $819.5 million and $445.9 million, respectively, and suspending $848.2 million of property tax rebates in 2010 — will remain intact.

“The budget we will introduce is far from perfect and will still be a tough sell among Democratic lawmakers, but the governor should be commended for working with us to take the sting out of some of its most harmful cuts,” Senate President Stephen Sweeney, D-Salem, said in a prepared statement. “Most importantly, this budget will be signed on time, and all the rumors of a shutdown will remain just that.”

In late April, Moody’s Investors Service warned that a potential budget delay could prompt a rating action if a budget stalemate were to extend beyond a week. Fiscal 2011 begins July 1.

“Certainly we think an agreement on the budget before the deadline is good news in that it avoids a state shutdown and in that sense it’s positive,” said Moody’s analyst Lisa Cole. “Obviously we want to review the budget further.”

Moody’s rates the state Aa2. Fitch Ratings and Standard & Poor’s both rate New Jersey an equivalent AA.

Like many state budgets, New Jersey is waiting to see if Congress will extend enhanced Federal Medical Assistance Percentages. The state’s fiscal 2011 budget includes $490.5 million of anticipated FMAP funds.

The announcement of a budget agreement followed the Legislature’s inability Monday afternoon to override Christie’s veto of an income tax increase for those making more than $1 million while the governor continued to promote his 2.5% property tax cap initiative — this time with the support of Newark Mayor Cory Booker.

Booker announced his approval of the 2.5% property tax ceiling, called Cap 2.5, as Sweeney was set to introduce similar legislation that would limit property tax increases to 2.9%.

New Jersey has some of the highest property taxes in the U.S., due in part to numerous municipalities that have their own police, fire, sanitation, and school districts as opposed to multiple local governments sharing such services with neighboring towns and villages.

To encourage consolidation of essential services, the governor believes a constitutional amendment that places a hard 2.5% cap — lower than the current 4% limit — on a local government’s property-tax hikes would force local governments to merge with other municipalities and make other efforts to rein in operating costs.

If approved by the Legislature, the measure would then go before the voters in November.

Cap 2.5 includes exemptions for debt-service costs. Municipalities could also increase property taxes above the 2.5% limit if voters approve through a local referendum.

Sweeney’s 2.9% proposal would hold property tax hikes at that level. He believes a slightly higher levy cap is more closely in tune with actual inflation rates. His measure is not a constitutional amendment and would not require voter approval in November. The plan includes cap banking, in which municipalities can reserve unused tax increases for future years. Christie’s initiative also supports cap banking.

“Certainly, New Jersey needs a solid cap, but it has to be a realistic cap based on realistic numbers,” Sweeney said in a statement.

Booker, a Democrat, is the latest of more than 200 mayors that have thrown their support behind Christie’s 2.5% cap. New Jersey has a total of 554 mayors.

“Gov. Christie, with his clear focus and determined drive, is putting meaningful and potent property-tax relief within reach,” Booker said in a prepared statement. “I am proud to join the bipartisan and growing list of state and municipal leaders who are advocating for deep and durable reform — reform that stitches a 2.5% property tax cap into the fabric of our state while providing a critical toolkit capable of preventing key municipal costs from ballooning.”

The New Jersey League of Municipalities has been pushing for limits on property tax hikes, but only if such restrictions follow changes to employee benefits and other local government expenses. While Christie’s Cap 2.5 initiative includes proposals to mandate arbitrators to craft contract awards that would not push a local government’s property tax increases beyond the 2.5% cap, critics say lawmakers should vote on such issues before decreasing the property tax cap.

“We are committed to working with the Legislature and the administration toward levy cap reform, so long as certain considerations are satisfactorily addressed,” said Buena Vista Township Mayor Chuck Chiarello in a statement released by the league. “These would include statutory reforms relating to binding arbitration, civil service, public employee pensions and benefits, disciplinary procedures, school and special district elections, and mandates relief. These must be enacted before the voters are asked to approve the constitutional caps or the legislature advances new statutory caps.”

Meanwhile, the General Assembly voted 47 to 33 to override Christie’s veto of a bill to restore property tax rebates to seniors through a 1.78% tax increase on those earning more than $1 million. The vote was short of a two-thirds majority.

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